Economic Activity Down

Total existing home sales dropped 0.6 percent to an annualized rate of 4.92 million units in March. And the Chicago Fed National Activity Index (CFNAI) decreased to –0.23 in March from +0.76 in February.

Total U.S. existing home sales dropped 0.6 percent to an annualized rate of 4.92 million units in March from 4.95 million units in February, according to the National Association of Realtors on Monday. Compared with the same month a year earlier, when the rate of 4.46 million units, the current sales rate is up 10.3 percent.

The organization chalks up the monthly dip to a persistent drop in inventory, even though inventories saw an uptick in March, as they usually do in the early spring (NAR’s inventory numbers aren’t seasonally adjusted). Total housing inventory at the end of March increased 1.6 percent to 1.93 million existing homes available for sale, which represents a 4.7-month supply at the current sales pace. But the March 2013 inventory came in 16.8 percent below a year ago, when there was a 6.2-month supply. 

Supply might be anemic, but demand isn’t, according to the Realtors. “Buyer traffic is 25 percent above a year ago, when we were already seeing notable gains in shopping activity,” NAR chief economist Lawrence Yun said in a statement. “In the same timeframe, housing inventories have trended much lower, which is continuing to pressure home prices.” 

Chicago Fed Says Economic Activity Swigs Negative 

Led by declines in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) decreased to –0.23 in March from +0.76 in February, according to the central bank on Tuesday. Three of the four broad categories of indicators that make up the index decreased from February, while only one of the four categories made a positive contribution in March.

The lone up category was production-related indicators, coming in at a scant +0.01 percent. The three other board categories – employment related; sales, orders, and inventories; and consumption and housing – were all below historic trend. All together, the Chicago Fed uses 85 economic indicators, each one belonging to one or another of the four broad categories, to calculate its index. 

The index’s three-month moving average, which bears to unwieldy name CFNAI-MA3, decreased to –0.01 in March from +0.12 in February. March’s CFNAI-MA3 suggests that growth in national economic activity is pretty close to its historical trend. This kind of CFNAI-MA3 also suggests subdued inflationary pressure from economic activity over the coming year, according to the Fed—thus disappointing those who have predicted inflation because of QE3. 

Wall Street was up on Monday, with the Dow Jones Industrial Average gaining 19.66 points, or 0.14 percent. The S&P 500 was up 0.47 percent, while the Nasdaq advanced 0.86 percent.